Angie Through The Looking Glass - Merkel visits Athens

Greek recovery is back. The news story that refuses to die no matter how many times the predictions are debunked.

Photo I took during Merkel's 2012 visit to Athens.

Once again the world's press and a large chunk of the nation's police force descended upon Athens in anticipation of the visit by German chancellor, Angela Merkel to beleaguered Greek prime minister, Antonis Samaras.

Bathing in glow of German praise for his government's austerity policies and the a successful five - year bond auction the fragile coalition government and its supporters in the the media were certain that this marked the end of a six-year economic downturn that has not been seen in a developed European country at peace since the Great Depression. Nor was such optimism limited to local reporters and analysts, foreign outlets such as the BBC also waxed lyrically that Greece had finally turned a corner.



Alas, as with so many similar predictions made in 2009, 2010, 2011, 2012 and 2013, the facts, on closer examination do not bear out the basic assumption that a successful bond sale signals growing confidence in Greek economic performance and hence represents the end of the downturn in the real economy. Unemployment still remains high at 26.7% and 20% of those in employment remain unpaid for at least three months, often for much longer. Exports have dropped and GDP is still more than 25% less than it was in 2008. The government is mired in scandal over its connection with Golden Dawn and during the last austerity vote saw it's parliamentary majority drop to just one MP in the 300 seat house.

As if to underline the growing sense of unease, a massive car bomb went off outside the Bank of Greece building in central Athens a day ahead of Merkel's visit. Although police were quick to claim it was probably the work of anarchists, the sophistication and scale of the attack is completely unlike the kinds of attack such groups usually carry out. As yet no individual or group has claimed responsibility.

Yet none of this could puncture the joint Hellenic-German display of  mutual appreciation on display, and to make sure that that would remain so 5000 police officers were on duty to enforce a ban on any form of demonstration in the centre of the Greek capital. Strange that a leader who compared the NSA with the East German secret service (Stasi) for tapping her phone had nothing to say with a display of state strength that Erich Honenker would have gladly approved of.

In keeping with the authoritarian spirit of the day, the Greek state run press Agency APA doctored the chancellor's speech, deleting all reference to austerity in their translation which was released to the local press. Unnecessary given that both state and private broadcasters (which are owned by country's oligarchs with close ties with the ruling parties) went to extraordinary lengths to make sure the prime minister's version of events got as wide and uncritical a hearing as possible.

On  the other hand reactions to Merkel's appearance in Athens on Twitter were almost universally negative, with many comparing it to the visit of a monarch to a newly acquired colony and seething at the revoking of basic civil rights for the duration. Abroad, financial analysts were less giddy with excitement over possibilities of a Greek recovery given that fact that none of the economic fundamentals which are crushing development have changed.

So what was the point? Economically almost none, but politically the return of Greece to the money markets is being sold as a indication that the austerity policies which have brought many European economies to their knees is finally paying off. This is a message we are going to be hearing repeatedly over the next few weeks as EU countries go the poll to vote in European parliamentary elections in May and while this media narrative may play well in Germany throughout the rest of Europe the response could be more muted.

Usually, EU elections are marked by indifference both among the public and the media, but given the growing unpopularity of parties implementing austerity and the rise of the far Right this year's vote is the nearest thing the continent will have to a referendum on the dominant austerity narrative. In the UK, the Conservative/Liberal coalition government is nervously facing the prospect of a spike in UKIP support at their expense. Hollande's position in France would also be seriously weakened if he has a repeat of the debacle his party suffered in the recent local elections.

As well as EU vote Greece will also have local elections in May and the reality is that it will mark the end of a political era with PASOK being ousted from power in many districts, a fall from political grace that has seen its share of the vote drop from 43% in 2009 to around 4%, if recent polls are to be believed. That will probably signal the downfall of deputy PM and PASOK  leader Evangelos Venizelos's time as party leader, even his blustering, bullishness will not be able to keep in check anger at how the party has been destroyed by its leadership's commitment to austerity policies.

Similarly, the prime minister's New Democracy party is also growing restless, unhappy with the coterie of far right advisors and politicians that surround the leader, also worried that they too, may eventually suffer the same fate as PASOK as their power is challenged by SYRIZA on the left and Golden Dawn of the right. A poor showing in May elections may also trigger a challenged to Samaras's leadership.

This is why the visit of Angela Merkel and the bond auction was so vital to a political leadership, desperate to convince the public that despite all the evidence to the contrary the Greek economy is on the right track. Whether this will be transformed in votes in the polls is another matter.Putting aside the growing anti-German sentiment in Greece, the statistics and indicators being used by politicians and media to make the case for recovery are, at best tangential to the everyday struggle for survival many Greeks face. Spreads, yields, and bonds will not make finding a job any easier, reduce skyrocketing tax bills or stop the flood of young people leaving the country.

Repeat after me: You have no choice

Repeat after me: You have no choice, originally uploaded by Teacher Dude's BBQ.

This is the message that the Greek media have been bombarding the country with ever since the PASOK government went cap in hand to the IMF, EU and ECB for a bailout loan that would, it was said save the country from bankruptcy.

Whilst the strict terms under which the the money is being spent may help French and German bankers sleep better at nights the cost of "internal devaluation" have wrecked havoc with those Greeks at the bottom of the ladder. Hit by a triple whammy of large price hikes caused by two increases in VAT, cuts in income and massive rise in unemployment many are struggling to survive, cutting spending on even basic such as groceries to the bone.

This in turn is further deepening the crisis by hammering the country's retail sector which has responded by shedding jobs and so the vicious circle creaks on.Even going to Greece's famed beaches has become a luxury beyond the reach of many as petrol has risen by nearly 60% in less than a year.

The government say we have no choice, there are no alternatives and the measures, as painful as they are are necessary to restore Greece to financial health. However, in the absence of any kind of coherent plan for economic growth the present policy of cutting costs and raising more government revenue through indirect taxation seems a recipe for disaster and is likely to doom the country to a long period of stagnation and poverty the likes of which modern Greece has not experienced in 50 years.

Summer is not traditionally a period of intense political activity here but come September Prime minister Giorgos Papandreou is likely to be faced with an electorate at the end of their tether and outraged by a political system that has been marked by both massive corruption and unbridled incompetence. At that stage even his supporters in the supine national media are not going to be in a position to help him out of the hole he has dug for himself, his party and the country.

Greece: The morning after

Much of the current media coverage over Greece's debt crisis is focused on how the country is going to raise the funds necessary to cover the $400 plus billion it owes creditors. Scenarios concerning the role of Germany and/or France in bailing out Athens are discussed constantly on national TV and in the newspapers and what will need to be done in order to convince Greece's European partners to cover cost of lending the billions needed just to keep the country afloat.

However, whatever happens in the coming months the question of what Greece does next in a world in which its financial choices are closely scrutinised by whatever monetary institution steps into the breach to save the country from bankcruptcy has not been addressed. The prospect that an elected socialist government will be obliged to implement a conservative fiscal policy controlled by unelected officials raises all kinds of political dilemmas which Giorgos Papandreou's PASOK administration will have to deal with in the immediate future.

Papandreaou will be forced to challenge directly exactly those public sector trade unions which have put him and PASOK in power. In addition he will be forced to cut areas of spending which have been used by successive government to ensure political support.

The prospect of a place in the Greek civil service has long been the source of political power for parties on the right and left of the political spectrum. This combined by the promise of public sector contracts to economic elites in the private sector form the basis of the country's feudal political structure and in no small measure contributed to its present woeful economic situation.

Instead of land and power being swopped for military service the present Greek version of feudalism sees votes and political support flowing up the system in return for public funds and the influence it garners flowing downwards. It is a structure of patron-client relations which links the heads of the major parties to the humblest villager and is the lifeblood of modern Greek politics.

The ebb and flow of such influence and the complicated web of personal, familial and political relations that it engenders helps explain much of the apparent confusion and chaos of modern life in Athens and other major cities. Much of the country's infrastructure is divided into a patchwork of competing fiefdoms that have formed as a result of the present political setup. Each participant owes their position and continued economic well-being to maintaining the right connections with those above and below them in the hierarchy. In such a system qualifications, skills, effectiveness and ability play second fiddle to being able to curry favour with those who are in a position to advance your career.

Another by - product is chronic inefficiency and confusion as its duty of every fiefdom to ensure that it gets the maximum amount of resources in order to guarantee its survival. Co-operation and cost cutting mean giving up exactly those resources one needs to make sure that money and influence continues to flow to those whose support you need.

The effects of this system also affect the private sectors as the companies competing for contracts with the public sector, a huge player in the Greek economy, do so on the basis of political, personal and family connections. In some cases this takes the form of outright bribery but many others there is the mutual understanding that favours given must at some point be returned. It is no coincidence that many of the country's richest men have media wings attached to their business conglomerations which can be used to promote or attack parties and politicians .

The upshot of this unholy alliance is that crony capitalism and "licence Raj's" dominate the economy stifling innovation and competition. There is little incentive to cut the cost of your product or improve the quality of your service in such a system. As a result Greek companies which dominant nationally rarely have the expertise to break into developed markets where transparency means that methods used at home cannot be employed.

Whilst foreign observers often point the finger of blame at Greece's powerful public sector unions for lack of competitiveness and low productivity the reality is that pay in the private sector has remained stagnant for years and that much critised worker protection laws that supposedly coddle unsuitable employees are rarely applied to non - public sector businesses. Despite a pool of cheap, educated labour which can be hired and fired at will the private sector has done little to prepare for the demands of a modern globalised economy and instead reaped the benefits of low wages while raising prices far beyond the rate of inflation.

It is difficult to see how an economic and political system run on such principles can reform itself in the kind of time scale being proposed by Europe and controlled by exactly those people who helped run the country into the ground in the first place. The obvious answer is that Greece will not be able to implement the kinds of reforms being demanded and that in trying to square the circle the country will tear itself apart as different social and economic groups turn on each other to preserve a semblance of their priviledges and power.

Already there has been a growing wave of political violence with terrorist attacks now forming a staple of the daily news. That combined with a burgeoning crime rate form the background to a society that appears to be gradually coming apart at the seams.

http://my.nowpublic.com/world/greece-morning-after

Greece's financial problems European roots

The best things in life are free, originally uploaded by Teacher Dude's BBQ.

Today Greek prime minister, Giorgos Papandreou is in Russia, yet another stop on an itinerary which has seen him flit across the globe in a desperate bid to secure fresh funding for Greece's troubled economy. Faced with $420 billion debt the small Balkan nation with a population of just 11 million has sparked off a crisis which threatens to derail the European Union's grand experiment in creating a unified currency which started in 1999.

The revelations that Athens had massively under reported its debt load and so violated the conditions of the Stability and Growth Pact saw the light of day with the election of the centre left PASOK party in the country's national elections in October. The news that Greece's foreign debt load had reached 12.3% of GNP sent shock waves through European political and banking circles, raising the possibility that the Greek government might not be in the position to honour its monetary commitments.

The chance that a Eurozone nation might default on its repayments sent the cost of Greece's foreign loan requirement soaring and forced Germany's foreign minister Guido Westerwelle to backtrack on previous statement that the country had to put its own house in order before asking its European partners for help.

However, despite the storm of criticism Greece has weathered over its bloated public sector, rampant corruption and falling competitiveness the problems that Greeks face also have their roots in factors which have little to do with the country's internal pathologies that have long been known yet until recently politely ignored by fellow EU members.

As with the other PIIGS (Portugal, Ireland, Italy, Greece and Spain) nations the introduction of the Euro as a common currency has seriously limited the ability of governments to regulate their economies so leading to a fall in competitiveness. Unable to adjust their local exchange rates businesses in Europe's soft underbelly have been gradually losing traditional markets due to the rise in cost of their products caused in part by the strength of the Euro. Unlike their northern European partners such as Germany and France the introduction of the Euro has lead to rising costs and prices which their economies have not been able to offset with rises in productivity.

However, the current crisis its roots in the European Exchange Rate Mechanism which means the the European Central Bank is obliged to support the Euro should it fall or raise by 15% against other currencies. As Britain learnt to its cost during Black Wednesday in 1992 such a commitment means that the currency could be the object of speculators who make vast fortunes selling back Euros to the ECB as art of its attempt to shore up the price of the currency.

The UK burnt through 27 billion pounds in the course of a day in a failed attempt to prop up the currency, making international financier George Soros $1 billion dollars richer and leading to Britain to withdraw its application to join the ERM.

With the chance that such a feat could be repeated on a European wide scale with even greater profits there is the possibility that the intense financial pressure of Greece is simply a stalking horse for a larger effort to weaken confidence in the Euro so leading to a fall in its price on the international money markets and so triggering a buying spree by the ECB which could reap billions of dollars in profits for banks and speculators.

None of this bodes well for Greece since the underlying fundamentals that laid the country open to attack by speculators have not disappeared. The country still continues to be plagued by a lack of innovation and a public sector which has ballooned out of control to such an extent that even ministers have no idea how many people they employ. In addition any serious econmic policy is necessarily hampered by the fact the succesive governments have cooked the books so extensively that the basci data needed to plan changes to the economy is next to useless.

The demands by France and Germany's conservative governments that Greece radically cut public spending and raise more revenue by taxation is certain to create a wave of intense protest by public sector unions who will not willingly agree to pay cuts or loss of jobs. In the long term a shrinking public sector is unlikely to help address fundamental productivity issues which stem from crony capitalism and the existence of shadowy price cartels which mean that Greek businesses have traditionally only invested in innovation as a last result, relying instead upon personal and political contacts with the country's main parties in order to secure contracts and inflated profits.

It seems too much to expect those who have created a system whereby huge amounts of money can be earnt with minimum risk to change the habits of a lifetime and take their chances in the cold waters of real competition in harsh international markets.

Greece's financial woes set to continue.

Greece's financial woes set to continue., originally uploaded by Teacher Dude's BBQ.

According to Greek prime minister Giorgos Papandreou yesterday's decision by the country's European partners to bail out Athens was a “breath of life”. However, the decision by the EU to rescue their southern partner from the mercy of international finance markets may not be enough to put Greece back on a sound monetary footing.

For the past month the European Union has seen the integrity of the Euro threatened by the prospect of Greece defaulting on its massive $419 billion debt load. Whilst Germany has made it clear that Greece should put it's own house in order rather than let relay on its European partners the prospect of a domino effect involving Portugal, Spain and perhaps Italy has raised the prospect of a direct threat to the viability of the Euro itself.

However, even if Greece does manage to find the funding to service its debt in the immediate future the country faces the reality that any such bailout will come with strings attached and that in essence the country will have to cede control over its financial policies to Brussels.

Already the recently elected left wing PASOK government has announced increases in tax on petrol, alcohol and tobacco as well as saying that it will freeze public sector pay for two years. In addition sweeping changes in taxation, social security and public spending aresaid to be in the pipeline.

Doubts remain though over Athens ability to implement such radical changes given the massive public resentment they have created with the country's civil service trade unions. Already proposed changes to police and armed services pension contribution schemes have been postponed in the face of opposition.

Also the ability of Greece notoriously corrupt tax authorities to get tough on tax evasion has been questioned by Greeks long accustomed to such calls by political parties on both the left and right. As one Thessaloniki taxi driver drily put it, getting Greece out its present fix by raising taxes is like bailing out the Titanic with a sieve.

As well as strikes and public demonstrations there is also the fear that growing social unrest will spark off a repeat of the month long revolt which swept the country in December 2008 following the death of a teenager, allegedly shot by the police in central Athens. Although the violent street confrontations have died down the clashes have given rise to a resurgence in terrorist violence which has seen police stations machine gunned and almost daily firebomb attacks on banks and government targets.

Beyond the immediate problem of excessive public spending Greece faces enormous macro – economic challenges which have been growing since it joined the Euro-zone. By adopting the Euro the country has gained financial stability at the cost of raising prices and shrinking competitiveness in international markets.

With the old Drachma Greek products and services could exported at more competitive prices and the government could, if necessay devalue the currency so cutting prices in international markets. The rise in cost brought on by the Euro combined with cheap Chinese textiles an manufactured goods have decimated Greece's industrial base, especially in the north of the country where unemployment was rising steadily even before the present crisis. As with East Germany's adoption of the Deutschmark the use of the new currency has made Greek goods too expensive for their traditional markets.

In addition the country's endemic corruption has meant that many Greek companies have long relied on personal and political connections to win contracts with the state and so have had little incentive to increase productivity or lower costs. The result of decades of such crony capitalism is that such countries are ill – equipped to operate in international markets.

The existence of shadowy price cartels has also helped blunt Greek competitiveness as many parts of the economy and especially the retail sector is able to avoid damaging price wars and so has done little to improve service or reduce costs. The irony is, as the Greek media has been quick to point out that feta cheese is now cheaper in Berlin or Amsterdam than it is in Athens.

Although Greece's leader has pointed the finger of blame at the previous New Democracy government for hiding the scale of the country's financial woes the truth is that ex - PM Kostas Karamanlis was simply following the strategies inherited from the previous PASOK government's who systematically hid debts in order to meet the entrance requirements for the Euro-zone.

It should be noted that Papandreou held several high level posts in the PASOK government from 2000 – 2004 including responsibility for the 2004 Olympic Games which ended up costing 10 billion Euros, nearly three times that of the Sydney games in 2000.

The Greek parliament is still investigating charges that the German based Siemens corporation spent millions bribing Greek politicians in both major parties in order to win security contracts.

www.demotix.com

Poverty in Greece

Poverty in Greece, originally uploaded by Teacher Dude's BBQ.

To listen to some international accounts of the current debt crisis you might be forgiven for thinking that the 300 billion euros Greece owes has been used to fund some kind of Balkan version of a Scandanavian welfare state. That the money has been spent on funding an unsustainably generous social safety net.

However, even a brief visit to the country's decrepit hospitals and threadbare schools is enough to disabuse even the most casual observer that that the huge mountain of debt accumulated has been used to improve the lives of the poorest Greeks.

While in theory Greece has a welfare state that compares with other EU members the reality is that much of this provision is of low quality or non-existent. As a result of such systematic deficiencies people are forced to pay for services that other Europeans take for granted. Few, if any student entering the countries universities have got there without massive investment of time and money by parents in the form of expensive extra tuition.

Similarly, medical treatment in the country's supposedly free health care system costs billions in terms private charges and bribes.

Instead most of the money has simply evaporated in a miasma of corruption and incompetence which sees that any public service contract almost invariably goes over cost and requires double ot triple the time originally alloted.

Case in point is the underground system being built in the northern port city of Thessaloniki which started 45 months ago and already is 32 months behind schedule. That number is set to rise as the Itallian construction company which won the countract has announced that it will fire 80% of its employees in March if it does not receive extra funding.

On the other hand the country Greece's bloated public sector can still afford to pay some of its better connnected employees 16 salaries per year. Those luckily to be employed by parliament are paid for 16 months work annually. At the other end of the spectrum tens of thousands often wait months or years to be paid wages owed.

Giorgos Papandreou has been working hard over the last week at the Davos World Economic Forum to try and persuade fellow Europeans and international economic markets that the his newly elected socialist government can reign in spending and raise more revenue. However, how much influence a system that his party has been instrumental in setting up and maintaining over the last 30 years is open to doubt.

For the last four decades both left and right have used the public sector as a way of gaining and maintaining voter loyalty by handing out jobs and contracts in return for political support. As a result the country's infrastructure has been manned not by the brightest or the best but the most faithful.

Entry and progress depend not on competence but on maintaining the myriad of personal, family and political connections that form the basis on any succesful career in Greece.

With unemployment predicted to hit one million in 2010 conflict and clashes between social groups unwilling to make sacrifices and a government unable to pay seem unavoidable. Already farmers have blockaded much of the country's transport network in order to demand one billion euros in funding and sweeping changes in agricutural policy.

Demotix

Greek trade unions announce general strike for 17th December

Greek trade unions announce general strike for 17th December, originally uploaded by Teacher Dude's BBQ.

Protests continue in Greece

STAGE workers demonstrating., originally uploaded by Teacher Dude's BBQ.

Today there were several protests in Thessaloniki and despite the pouring rain people marched through the centre over loss of jobs, lack of funding in education and in support of those arrested in mass detentions by the police on Sunday and Monday.

Also in between lessons and photography I was interviewed by France 24 over the background to the latest events here in Greece. They were especially interested in the possible social effects of the country's borrowing difficulties.

See here for the story.

Making the world safe for Gucci

The press here in Thessaloniki has been full of stories on the recent clamp down on crime. According to the Greek national daily newspaper Kathimerini, the authorities carried out 1912 checks, reported 386 violations and made 67 arrests. I happened to be in town at the time and as far as I can tell the police's efforts seemed to be once again a "round up the usual suspects" affair in which the plain clothes and uniformed officers chased the African street vendors who sell knock-off bags and other accesssories in the centre.

In the meantime last night thieves attempted to steal a ATM located inside the Praktiker DIY super store by throwing a hand grenade at it, two large stores were attacked midday in the centre, a bank was firebombed in Euosmos and the body of a young woman was found floating in the harbour.

I think we're moving more and more towards a model of law and order that befits a banana republic in which the kind of crime that affects ordinary people is met with indifference and incompetence but in which public order offenses get the lion share of police time and resources. Perhaps this government is, in fact despite its chronic inability to plan more than five minutes ahead, getting ready for the future, knowing full well that there is going to be massive resistance to the inevitable cuts in public services and that the rich are going to be more and more the target of protests as times get harder.

According to the Kathemerini and Eleutherotypia the government is planning to double the number of riot police.In addition the Athens police authorities are creating rapid response teams to police the upscale shopping districts in the centre of the capital even while crime rates in the rest of the city are going through the roof.

The present conservative New Democracy administration cannot fund a US style New Deal because they have already borrowed heavily and even more recklessly lied about financial fundamentals such as the extent of the country's debt load and growth projection to such an extent that the government's macro - economic data is now considered unreliable by EU auditors and potential creditors. The result is that future loans can only be secured at cripplingly high interest rates and that the government will have no alternative but to sell off public assets and cut spending. Both of which will lead to massive public unrest.

Hence the increase in riot police units.

On the other hand, it is comforting knowing that in a world beset by crisis and mayhem the market for high end Italian accessories remains safe under the vigilant eye of the authorities.

Further food price rises hit Greek consumers hard

While the rest of the economy may be in freefall many of the large national and multi-national companies that dominate the Greek food and drinks industry have raised the price of a range of basic goods far in excess of the official rate of inflation.

This is the third time in twelve months that such increases have been announced further squeezing family budgets already under strain due to the ongoing economic crisis.

Consumer organisations have been quick to call for a boycott of companies considered to be profitering, however the reality remains that the retail cost of food and other everyday essentials remains stubbornly high. Many Greeks of all political persuasions argue that the reason the average consumer pays over the odds is the presence of cartels that choke competition throughout the country.

This week the Greek competition commission imposed a fine of 29.9 million euros on the Swiss food conglomerate Nestle for using its dominant position in the Greek market to shoulder out competitors in supermarkets and other distribution points.

Similarly, energy giants Shell and BP Hellas were fined 50 million Euros for price fixing in November 2008.

Despite such penalties, the right of appeal combined with Greece’s slow moving legal system mean that there is doubt over how much will finally be paid out and when it will be paid.

In addition Greece’s competition commission is itself still embroiled in ongoing scandal following the revelation that some members of the commission allegedly asked for a 2.5 million Euros bribe from Greek diary companies in 2007 in order to reduce 25 million in fines fines imposed upon them for price fixing.

Even before the latest price hikes Greek consumers were paying 66% more than German and Dutch shoppers for basic supermarket items. As a result last year Greek food sales saw their first decline since 1974, a further indication that even before the global financial crisis many of the country’s poorest were cutting down on basics.

As the global slowdown starts to affect Greece’s most important economic sectors; tourism, shipping and construction doubts have been voiced about how much more lower income Greeks can cut from their family budgets